Wednesday’s bond market has opened in negative territory with stocks showing early strength. The major stock indexes are posting fairly strong gains during early trading, pushing the Dow up 93 points and the Nasdaq up 34 points. The bond market is currently down 6/32 (2.16%), but due to gains late yesterday we still may see a slight improvement in this morning’s mortgage rates.
This morning has no relevant economic data to drive bond trading and mortgage rates. It is worth noting though that we appear to be at an important level in the benchmark 10-year Treasury yield. We have seen this yield touch 2.15% and move higher recently. The inability to move below that threshold significantly raises the likelihood that yields may move higher from hear rather than lower. Since mortgage rates tend to follow bond yields, this means higher pricing for mortgage shoppers. On the other hand, breaking below 2.15% allows us to look towards 2.00%. Unfortunately, until that actually happens, I strongly recommend proceeding cautiously if still floating an interest rate and closing in the near future.
The Treasury will auction 5-year Notes today and 7-year Notes tomorrow. Neither of these sales will directly impact mortgage pricing, but they can influence general bond market sentiment. If the sales go poorly, we could see broader selling in the bond market that leads to upward revisions to mortgage rates. On the other hand, strong sales usually make bonds more attractive to investors, bringing additional funds into bonds. The buying of bonds that follows often translates into lower mortgage rates. Results of the sales will be posted at 1:00 PM ET each day, so if we are to get a reaction it will come during early afternoon trading.
Tomorrow’s only economic news will be the weekly unemployment update that is expected to show 272,000 new claims for unemployment benefits were filed last week. That would be a slight decline from the previous week’s 274,000 initial claims, indicating the employment sector strengthened slightly last week. The higher the number of new claims, the better the news it is for bonds and mortgage rates because rising claims indicates a softening employment sector. However, since this is only a weekly snapshot of the sector, it takes a wide variance from forecasts for it to have an impact on mortgage rates.